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December 2016

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Another pull back today on bearish options as we tested the 60 cent level again on Z'08. There was some call spread selling in the forward months today which shows a bearish outlook for the cotton market going forward. We hit some sell stops and pushed the market lower across the board in commodities.

Cotton did close off the lows and we may start to move sideways in a 60/65 cent range in the short term. Volume was good with 15,000 futures and 18,000 volumes, but the open interest remains on the lows as we just can't get the specs interested in the long side.

Export sales should be good tomorrow and we are getting more strong demand on this pullback in NY. We will see good resistance scale up in cotton and this will depend largely on how well the grains do in the next several weeks.

However, the seasonal pattern is to go lower this time of year and unless we get some surprises in the harvest, the market should move sideways to lower. We will be starting the big Ramadan celebration this weekend and this may dampen interest over the next two weeks in large importers such as Turkey and Indonesia.

Technicals were starting to turn positive and we certainly were due for a bounce after grinding below 60 cents last week. However, we are running into further selling pressures scale up even though there is still good demand at the 60 cent level in Z'08.

This will depend on outside markets, but the current financial crisis should pump money into the commodity sector. The weak economic conditions are hitting Asia as well as Europe and there does not appear to be an end nearby.

Need to see how the global markets react this week, but with commodity prices bouncing hard on Monday, it looks like we are in for a short term correction in cotton which could try and test resistance at 65 cents.